Modelling Recession in Two European Countries: the Generalized BHAR model

Abstract

The time series of German and Italian recessions are analyzed using a novel approach for binary time series introduced in [19]. For the German recessions a purely autoregressive model for binary data has provided satisfactory results. For the Italian recessions, on the other hand, to reach a significant fit we have applied a model including some lags of the German driving economy. An interpretation in terms of short-run and long-run
effects is proposed.